Minimum wage – the debate begins

The Singapore Democratic Party (SDP) was among the first to call for a minimum wage for Singaporean workers. It was part of its election manifesto in 2006. (See here.)

“Ensuring a minimum wage for the lowest of the low-skilled employee guarantees that prosperity is shared by all,” the SDP said. “Legislation is needed to prevent Singaporean workers from being exploited and ensure that employees be paid fair wages for their work commensurate with the cost of living. For a start, the minimum wage should be set at $5 per hour.”

In February this year, the Reform Party too lent its support to the idea. “[The] Reform Party has consistently advocated the use of a minimum wage … which would apply to all workers and thus force employers to cut back on the least productive and low-skilled workers first,” it said in response to the government’s 2010 Budget. (See here)

Now, Senior diplomat, Mr Tommy Koh has joined the call. “[The] growing disparity and the hardship faced by the lowest 20 per cent of our workers is a threat to our social cohesion and inconsistent with our policy of inclusive growth,” he said on Wednesday. He added that “Singapore is a First World country with a Third World wage structure.” He argued in favour of such a wage as it will improve the lot of Singaporeans in low-paying jobs. (See Straits Times report.)

Below is an excellent riposte by blogger Lucky Tan to the Minister of State’s position on minimum wage. Lucky Tan has written about the issue for some time now.

What is your take on the issue of minimum wage?

Here is an excerpt from Lucky Tan’s blog:

The MOM has responded to calls for a minimum wage on its blog:

In a reply by Minister Lee Yi Shyan, he wrote that minimum wage “distort market mechanisms and also makes the labour market more rigid. In fact, it can even hurt employment opportunities for low-skilled workers, making it harder for them to find jobs”.

A minimum wage, if properly set, is the income required for decent living in Singapore. It only distorts the market and hurt the employment of workers when you have an economy dependent low wages and many workers currently employed below the minimum wage. If the govt had achieved growth in the economy by raising productivity and fostering innovation, the number of low wage workers will be small and setting a minimum wage will only affect the workers at the margin by pushing up their wages.

The PAP govt is unable to implement a minimum wage because a large segment of the workforce does not make enough for decent living. Why do we have this problem? The PAP govt opened the floodgates to cheap foreign labor to grow the GDP disincentivising businesses from making investments to raise productivity and retained industries dependent on cheap labor. It is disingenuous now for the Minister to say he is worried that a minimum wage will “hurt employment opportunities for low-skilled workers”….they have already hurt these workers by importing cheap labor causing their wages to be depressed.

Read the rest of Lucky Tan’s article on his blog here.